Exclusion Clauses Essay Example

Exclusion Clauses4

Exclusion Clauses

Is the exclusion clause a valid term in the contract between Theatre and Alana?

Introduction

An exclusion term is defined as contractual term that limits or excludes the liability of a contractual party in case of breach of contract or tort. In many cases, exclusion clauses severely limit the right of contractual parties. Therefore, courts seek to limit the operation of exclusion clauses that are deemed unfair to contractual parties.

An exclusion clause is considered a valid part of a contract, if the party seeking reliance:

  1. Properly incorporated the exclusion clause in the contract;

  2. sufficiently expressed the exclusion clause to cover the particular situation.

Incorporation

As seen in L’Estrange v F Graucob Ltd [1934] 2 KB 394; [1934] All ER Rep 16, an exclusion clause is only valid, if it is properly incorporated into a contract by signing. In the case of unsigned documents, incorporation is only considered valid, if the party relying on the clause takes sufficient steps to make the other party aware of the existence of the clause. Notice contained in non-contractual documents such as receipts, tickets or vouchers is not considered effective. However, if the party seeking to rely on the exclusion clause takes reasonable steps to make the other party aware of the clause, it is considered effective. As seen in Olley v Marlborough Court Ltd [1949] 1KB 532, an exclusion clause is only considered effective, if the party affected by the clause is aware of the existence of the exclusion clause at the time of making the contract, or prior to entering into the contract. However, an exclusion clause will be considered valid, if the other party is aware of its existence through course of previous dealing.

The exclusion is ineffective as the contract between Alana and Theatre was not properly incorporated into the contract between the two parties. Incorporation through signing cannot be considered in these circumstances as the contract between the two parties was oral. Therefore, the validity of the exclusion clause is dependent on whether Theatre took sufficient steps to make Alana aware of the existence of the clause. Theatre clearly failed to make Alana aware the play tickets would be cancelled, if she failed to collect them an hour before commencement of the act. As set out in Olley v Marlborough Court Ltd [1949] 1KB 532, Theatre failed to make Alana aware of the existence of the exclusion clause at the time of entering into the contract or prior to making the contract. Therefore, the exclusion clause is ineffective as it not properly incorporated into the contact.

Under the doctrine of privity of contract only parties to the contract can seek contractual remedies. In this case, only Alana can sue Theatre for failing to make the tickets available as agreed in their contract with Alana.

Conclusion

Alana may be able to access the remedy of rescission which would mean that Theatre would have to return any consideration received as part of the contract. Alana may seek pecuniary damages that would put her in the same position financially as she would have been if she had not entered into the contract. Theatre will also have to compensate Alana for the $300 spent on Taxi fare for the tourist as she would not have incurred this expense, if Theatre had not breached the contract. It is easy for Alana to access damages as the two elements of causation and remoteness are easy to prove in the case.